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Holstein Canada

2020 Annual Report

CONTENTS 03 Annual General Meeting Agenda 04 President’s Report 05 Chief Executive Officer’s Report 07 Board of Directors 08 Board Committees

Holstein Canada | 2020 Annual Report

09 Member Awards & Recognition 10 2020 Financial Highlights 12 2020 Financial Report

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Holstein Canada, 20 Corporate Place, Box. 610 Brantford, Ontario N3T 5R4 Toll Free : 1 855 756-8300 www.holstein.ca

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2021 ANNUAL GENERAL MEETING AGENDA 1. Welcome and National Anthem 2. Call to Order 3. Moment of Silence in Memory of Departed

Members of the Holstein Canada Family

4. Approval of the Agenda 5. Introduction of the Board of Directors 6. Address of the President 7. Chief Executive Officer’s Report 8. Minutes of 2019 Annual General Meeting

of Members

Holstein Canada | 2020 Annual Report

9. 2020 Financial Report 10. Presentation of the 2021 Budget 11. Appointment of Audit Firm 12. Century of Holsteins 13. 2021 Member Resolutions 14. Intro to Committee Reports

a. Classification Advisory b. Show and Judging c. Breed Advisory d. Data and Technology e. Young Leader Advisory 15. Lactanet Message 16. Members’ Input Session 17. Unveiling of Cow of the Year 18. Invitation to the 2022 Convention in

Saskatchewan

19. Adjournment

PRESIDENT’S MESSAGE

Holstein Canada | 2020 Annual Report

We have missed our direct connection with our members because of all the cancelled events; such as: family social nights, picnics, education days, meetings and shows. Our goal was to keep you informed. We used the communication vehicles we have, for instance the HC website and InfoHolstein but also increased our social media presence and made information update videos as regulations constantly changed. I want to recognize Vincent and our entire staff for their dedication, being very professional in navigating through different circumstances and being incredibly accommodating when asked to work from home. Everyone has in some way or another been impacted by this pandemic. We want to recognize the frontline workers who witnessed the treatment and care of patients first-hand. As an agricultural community we have had the opportunity to participate in rallies that showed our appreciation to our medical professionals.

As we look back at another year for Holstein Canada, it is safe to summarize 2020 as a historical year like we have never seen before. We have gone full circle from a ground-breaking virtual AGM in April 2020 to using all the new skills we’ve learned to host our second virtual AGM in a much more robust way. Vincent Landry transitioned in as the new CEO in May 2020. Definitely an interesting time to join Holstein Canada when you can’t meet anyone and the organization is adapting to the health regulations of a global pandemic. Thanks to COVID restrictions, the Board has not yet experienced a full in-person meeting with Vincent. In fact, the Board has only had virtual meetings this entire past year. Unbeknownst to us when we penned our updated vision “A Healthy Canadian Dairy Industry for All“ with the well-being of our livestock in mind, that it would quickly come to include the health of our staff and members as well. All decisions are made using our Vision and Mission as the guiding principles to create our ideal future.

Despite it being such a different year, we have a lot to be thankful for. We didn’t want to make light of our journey but challenged each other to remain lighthearted and not become over-burdened. In that perspective, I want to thank the Board for their positive support and dedication. The technical support we have received to run our Board meetings was tremendous and helped us learn new skills imperative for meeting in a new way. For the future, we hope to reconnect with you personally but also recognize that with the advantage of technology we are able to reach more of you and connect more frequently which we will continue to do. Thank you for allowing me to serve on the Board. Keeping our services relevant and cost-effective will remain a challenge as we stand beside you, our members, in genetically moving your business forward. But, as long as we do it together we will always have a healthy dairy industry! Thank you,

Gerald Schipper President of the Board 04

CEO’S MESSAGE and respectfully returned to all Canadian farms. Our field teams continued to deliver classification and animal welfare assessment services. They did face some challenges - schedule changes, accessibility to amenities, and delays. Despite everything, we did it! This would not have been possible without the unconditional support of ALL our employees and members. Thank you!

Holstein Canada | 2020 Annual Report

Throughout this report you’ll learn how an entire team rallied together to ensure we could maintain Holstein Canada’s mission of delivering progressive services and programs to support dairy herd management. Producer Engagement Since last year’s annual meeting, we have increased our efforts to adapt our activities to a virtual platform. Initiatives such as the virtual AGM, the unveiling of the Master Breeders, and the numerous webinars conducted, have demonstrated that it is possible to include more members in our events. Rather than only being able to offer events to individuals who attended a venue, the pandemic allowed us to democratize them. The reach we achieved was eye-opening. Moving forward, we will continue to offer virtual options so we are able to reach as many of our members as possible, regardless of language or geographical location.

2020 was a year like no other for Holstein Canada. It was a year of innovation and resilience as we faced an unparalleled COVID-19 pandemic. The world was brought to a halt and a new way of thinking, learning, and living was forced upon us. Despite the challenges we faced, we didn’t let the pandemic define us. Our vision to maintain a Healthy Canadian Dairy Industry for All remained critical. Within days of the various government stay-at-home orders being announced, Holstein Canada quickly shifted to a remote working environment, providing our team with full access to all required communication tools. The transition was seamless and we were successful in providing the same trust-worthy customer support that our members have come to appreciate. And, we completed the transition to a remote workforce without ever missing a day! In a collective effort to preserve the food chain, our field resource services were withdrawn while the industry worked to establish pre-requisites. Once parameters were in place, and we were recognized as essential workers, our teams quickly

Youth Engagement A large emphasis on youth has been identified in our current strategic plan. Several actions have been completed to date. In addition to the Holstein Canada Young Leader Advisory Committee, all Holstein Canada committees now include a member of the next generation. The Junior Member Program has been completely revamped to make it more accessible. We are also continuing our actions in various educational institutions across the country. Several initiatives; such as the Youth Conference, have been moved in order to accommodate an in-person event. Some of the objectives simply can’t be achieved virtually. Growth & Value 2020 was a difficult year for business development. The definition of “essential services” complicated the recruitment work being done by our field and branch resources. This is the first year in a long time that we have not been able to recruit more members than we lost. This will have a significant impact on our business. Several strategies will be put into place in 2021 to counteract these effects.

On-Farm Service Excellence We have four pilot projects related to classification services that are currently underway. These projects will allow us to draw conclusions on the different ways of delivering our services on farms. Our goal is to offer services adapted to the present and future needs of our members. Several consultation meetings have already taken place with more to come. We would like to involve members and employees every step of the way. Our preliminary analysis work allows us to envision many advantages for members, employees and the organization.

Holstein Canada | 2020 Annual Report

Value-Added Technology With great pride, we successfully launched the new CONNEXXION application. This application is the cornerstone of our on-farm service approach. All of our services grouped in one application simplifies the onsite work for our resources when they visit your farm. For members and breeders of all breeds, access to new interactive reports will allow more in-depth analysis. The deployment of this project during a pandemic required commitment from the entire team. We will evolve with this new application and our goal is for continued progression. Business Connections We have addressed many industry issues over the past year and worked with various industry partners to move each topic forward. Soon we will be able to present our first data policy supported by a specialized legal team. Our collaboration with the breeds, and our shared commitment to speak with one voice in the Industry Summit exercise, has brought us much closer. We are planning several joint actions so we can continue to build together. We continue to perform animal assessments as part of the DFC ProAction Animal Welfare pillar. Our regular interactions with Lactanet have allowed us to move forward on many issues. Together we have been working on plans to facilitate production and the sharing of breeding data. Thanks to the owners of Semex for their prompt support in this matter. In the near future, the plan for the approach on nonpublishable data will be shared, allowing us to understand next steps and look forward to the future relating to production data. Thank You,

Vincent Landry Chief Executive Officer 06

BOARD OF DIRECTORS Gerald Schipper (President), ON Nancy Beerwort (Vice-President), ON Ben Cuthbert (2nd Vice-President), BC Willem Vanderlinde, AB Harold Sweetnam, MB Doug Peart, ON Dennis Werry, ON Angus MacKinnon, QC Benoît Turmel, QC

Holstein Canada | 2020 Annual Report

Elyse Gendron, QC Gilles Côté, QC Karen Versloot, NB Holstein Canada’s Vision A healthy Canadian dairy industry for all Holstein Canada’s Mission Delivering progressive services and programs for dairy herd management. Ideal Future • Holstein Canada is an essential business partner to all Canadian dairy producers • Whether on-farm or online, all dairy producers value Holstein Canada programs and services • Our team members offer unbiased consultation, informative resources and quality services that add value to every farm’s bottom line • We continually enhance our user-friendly service options • Holstein Canada continues to align and collaborate with stakeholders to increase industry efficiency for the benefit of Canada’s dairy producers

BOARD COMMITTEES Audit, Risk Management and Finance Chair: Ben Cuthbert, BC Angus MacKinnon, QC Doug Peart, ON Harold Sweetnam, SK / MB Vince Bosquet, ON–External

Holstein Canada | 2020 Annual Report

Awards Chair: Karen Versloot, NB Elyse Gendron, QC Doug Peart, ON Émilie-Sophie Parenteau, QC Breed Advisory Chair: Benoît Turmel, QC Ben Cuthbert, BC Nancy Beerwort, ON Jason Rietveld, AB Jean-Claude Fleury, QC Tony Van Lith, ON Phillip Vroegh, NS Dr. Matt Walker, ON

Classification Advisory Chair: Dennis Werry, ON Benoît Turmel, QC Cindy Wikkerink, BC Brian Carscadden, ON Todd Nixon, ON Thierry Jaton, QC Tyler Howard, PEI Dr. Matt Walker, ON

Cow of the Year Chair: Elyse Gendron, QC Jeff Donohoe, MB Hugh Hunter, ON Pier-Olivier Lehoux, QC Matt Clarke, NB

Data and Technology Chair: Elyse Gendron, QC Nancy Beerwort, ON Benoît Turmel, QC Doug Peart, ON Willem Vanderlinde, AB 08

Election Chair: Glen McNeil, ON

Governance Chair: Angus MacKinnon, QC Elyse Gendron, QC Harold Sweetnam, SK / MB Ben Cuthbert, BC Gerald Schipper, ON

National / Branch Joint Meeting Representatives Chair: Angus MacKinnon, QC Willem Vanderlinde, AB Gerald Schipper, ON Dennis Werry, ON Karen Versloot, NB Along with representatives from each branch

Show and Judging Chair: Nancy Beerwort, ON Dennis Werry, ON Kenton Lindenbach, SK Ari Ekstein, ON Dan Doner, ON Scott Brethet, ON Kim Coté, QC Pierre Boulet, QC Jeff Bysterveldt, PEI Young Leader Advisory Chair: Laurence Boulet, QC Board Representitives: Karen Versloot, NB Willem Vanderlinde, AB Lars Iversen, AB Mike Flaman, SK Ryan Wert, ON Lysanne Pelletier, QC Cynthia Campbell, NS Alex Dolson, ON

MEMBER AWARDS & RECOGNITION Century of Holsteins For 100 years of continuous Holstein Canada membership 1921 – 2020 Russell Dickout

Descendants of Joseph Dickout WOODVIEW Woodstock, ON

Master Breeder Awards Recognizing breeding excellence 4th

Blackstock, ON

2nd BIRKENTREE

Hunter River, PEI

3rd BOULET

Saint-François-de-la-Rivière-du-Sud, QC

1st

CLAYHAVEN

Wallenstein, ON

DONFIELD

Brandon, MB

1st

DUALANE

Ingersoll, ON

DUHIBOU

Saint-Lambert-de-Lauzon, QC

FLECHEDOR

Princeville, QC

1st

LAVENDER

Abbotsford, BC

LELLAVAN

Noel Shore, NS

1st

FLECHEDOR

Princeville, QC

Holstein Canada | 2020 Annual Report

ALTONA LEA

2nd MACPES

Saint-Narcisse, QC

St-Bernardin, ON

MIRELLA

2nd RAYPEL

Saint-Simon-de-Bagot, QC

ROBEL

Jonquière, QC

RONBETH

Hastings, ON

1st

THORNSPYC

Lacombe, AB

VALLEYVILLE

Glen Valley, PEI

st th

Scholarship Awards Supporting youth education ONTARIO Brooke Boonstoppel Dumfries, NB Brooke McNeil Guelph, ON Sabrina Van Schyndel Woodstock, ON

QUEBEC Catherine Bourdeau Maude Labbé

Rimouski, QC St-Lambert-de-Lauzon, QC

WEST Tara Sweetnam

Winkler, MB

2020 FINANCIAL HIGHLIGHTS Challenge - Change - Resilience

In March 2020, the COVID-19 outbreak was declared a global pandemic by the World Health Organization. Holstein Canada responded by recalling its field service employees and our office team was re-deployed to a work-from-home environment. For the first 12 weeks of national lockdown, we ceased classification visits and cattle assessments. When we returned to barns in June, it was with enhanced health and safety protocols and personal protective equipment to ensure the safety of our employees and dairy producers.

$12.7 M

$12.1 M

REVENUE

$1.7 M

EXPENSES

$12.7 M

SURPLUS* / DEFICIT

$12.1 M $13.7 M

-$0.2 M

$12.9 M

$13.5 M

-$0.8 M

$5.5 M

$9.3 M

RESERVE FUND

9,115

NET ASSETS

MEMBERSHIPS

$5.5 M

$9.3 M

$4.7 M

Holstein Canada | 2020 Annual Report

$1.7 M

$13.1 M

9,115

$7.5 M

$4.3 M

9,365

$7.8 M

307,869

9,774

232,724

REGISTRATIONS

10,820

COWS CLASSIFIED

307,869

GENOMIC TESTS

232,724

316,302

10,820

272,976

305,143

13,771

271,272

17,837

* includes Gain on Investments & Wage subsidy ACTIVITY NUMBERS BY PROVINCE PROVINCE

REGISTRATIONS

CLASSIFICATION

TRANSFERS

GENOMIC

2020

2019

2020

2019

2020

2019

2020

2019

2020

2019

British Columbia

360

366

23,334

24,559

13,967

17,587

1,116

2,422

693

723

Alberta

428

427

26,943

25,873

19,311

14,646

1,715

2,691

1,033

1,352

Saskatchewan

114

115

8,592

8,933

5,301

6,813

667

841

514

367

Manitoba

222

228

14,660

17,072

5,112

7,129

340

639

604

932

Ontario

3,472

3,568

116,025

115,357

77,112

88,752

10,900

14,109

3,239

3,917

Quebec

4,004

4,140

102,034

106,794

100,269

118,203

12,321

13,954

4,099

5,725

New Brunswick

167

171

4,792

5,101

3,202

5,710

437

699

206

388

Prince Edward Island

158

157

4,815

5,328

3,356

5,413

896

461

115

169

Nova Scotia

171

174

5,314

5,808

4,456

7,473

315

1,030

315

167

1,297

1,371

638

1,250

594

106

262

302

9,115

9,365

307,869

316,302

232,724

272,976

29,563

37,221

10,820

13,771

Newfoundland International TOTAL 10

MEMBERSHIPS

CLASSIFICATION ACTIVITY

HERD VISITS

2020 2019

10,894 15,263

Holstein Canada | 2020 Annual Report

HOLSTEIN ANIMALS

2020 2019

217,019 254,659

OTHER DAIRY BREED ANIMALS

2020 2019

15,705 18,317

TOTAL ANIMALS

2020

2019

232,724 272,976

2020 FINANCIAL REPORT

Holstein Canada | 2020 Annual Report

Lorna Fothergill, Controller

Stability Through a Global Pandemic

In managing the challenges of the pandemic, Management and the Board of Directors met more frequently during the 2020 year. Management provided several financial forecasts, outlining operations under worst case and best case scenarios to ensure that the Association was prepared under a variety of possible outcomes.

Supporting Employees Through the Canada Emergency Wage Subsidy (“CEWS”)

The Association qualified and received $1M from the CEWS program which was used in part to support employees who were unable to work due to COVID-19.

A New Normal

With enhanced bio-security and safety protocols, Classifiers and Assessors returned to your farms in full force in June. A strong second half of the year for both Classification and Registration activity numbers limited the impact of the pandemic to a 3% decrease in total annual revenues from the prior year. Expenses for the year were down signficantly, largely due to cancelled events and travel savings, as taking care of business over Zoom took over.

Maintaining a Strong Balance Sheet

Holstein Canada’s financial position is strong with Net Assets of $9.3M (2019 - $7.5M). $750K of expense savings were transferred to the Reserve Fund in 2020, with a further $250K transferred to date in 2021. A higher than usual operating cash balance will support continued uncertainty into 2021.

Reserve Fund

The Board approved strategy designates $4M of the Reserve Fund solely for emergency purposes, to provide the Association with cash in case of revenue impairment or extraordinary unplanned expenses. Amounts in excess of $4M may be considered for future development projects. At the end of the year the Reserve Fund balance was $5.5M (2019 - $4.7M).

KPMG LLP Commerce Place 21 King Street West, Suite 700 Hamilton Ontario L8P 4W7 Canada Telephone (905) 523-8200 Fax (905) 523-2222

INDEPENDENT AUDITORS’ REPORT To the Board of Directors of Holstein Association of Canada

Holstein Canada | 2020 Annual Report

Opinion We have audited the accompanying financial statements of Holstein Association of Canada (the “Entity), which comprise: � the statement of financial position as at December 31, 2020,

� the statement of operations and changes in fund balances for the year ended, � the statement of cash flows for the year then ended, �

and notes, including a summary of significant accounting policies and other explanatory information.

(Hereinafter referred to as the “financial statements”) In our opinion, the accompanying financial statements present fairly, in all material respects, the financial position of the Entity as at December 31, 2020, and its results of operations, its changes in fund balances and its cash flows for the year then ended in accordance with Canadian accounting standards for not-for-profit organizations.

Basis for Opinion We conducted our audit in accordance with Canadian generally accepted auditing standards. Our responsibilities under those standards are further described in the “Auditors’ Responsibilities for the Audit of the Financial Statements” section of our auditors’ report. We are independent of the Entity in accordance with the ethical requirements that are relevant to our audit of the financial statements in Canada and we have fulfilled our other responsibilities in accordance with these requirements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

© 2020 KPMG LLP, an Ontario limited liability partnership and a member firm of the KPMG global organization of independent member firms affiliated with KPMG International Limited, a private English company limited by guarantee. All rights reserved.

Page 2

Responsibilities of Management and Those Charged with Governance for the Financial Statements Management is responsible for the preparation and fair presentation of the financial statements in accordance with Canadian accounting standards for not-for-profit organizations, and for such internal control as management determines is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error.

Holstein Canada | 2020 Annual Report

In preparing the financial statements, management is responsible for assessing the Entity’s ability to continue as a going concern, disclosing as applicable, matters related to going concern and using the going concern basis of accounting unless management either intends to liquidate the Entity or to cease operations, or has no realistic alternative but to do so. Those charged with governance are responsible for overseeing the Entity’s financial reporting process.

Auditors’ Responsibilities for the Audit of the Financial Statements Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditors’ report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with Canadian generally accepted auditing standards will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of the financial statements. As part of an audit in accordance with Canadian generally accepted auditing standards, we exercise professional judgment and maintain professional skepticism throughout the audit. We also:

•

Identify and assess the risks of material misstatement of the financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.

•

Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Entity's internal control.

Holstein Canada | 2020 Annual Report

Page 3

•

Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by management.

•

Conclude on the appropriateness of management's use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Entity's ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditors’ report to the related disclosures in the financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusion is based on the audit evidence obtained up to the date of our auditors report. However, future events or conditions may cause the Entity to cease to continue as a going concern.

•

Evaluate the overall presentation, structure and content of the financial statements, including the disclosures, and whether the financial statements represent the underlying transactions and events in a manner that achieves fair presentation.

•

Communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit.

Chartered Professional Accountants, Licensed Public Accountants, Hamilton, Canada April 16, 2021

STATEMENT OF FINANCIAL POSITION December 31, 2020, with comparative information for 2019

Operating Fund

Reserve Fund

2019 Total

2020 Total

Assets Current assets: Cash (note 2)

737,510 $

1,374,277

787,245

1,703,212

1,418,358

Other receivables

86,687

125,354

Inventory

44,864

31,583

291,659

236,668

4,766,498

4,005,737

2,763,189

5,504,008

8,267,197

6,604,945

2,509,611

2,726,634

Accounts receivable (note 3)

Prepaid expenses Investments (note 4)

Holstein Canada | 2020 Annual Report

636,767

Capital assets (note 5) $

5,272,800

5,504,008 $

10,776,808

9,331,579

1,097,819

- $

1,097,819

1,257,530

Liabilities and Fund Balances Current liabilities: Accounts payable and accrued liabilities (note 6) Deferred revenue (note 7)

143,268

107,002

161,226

177,647

1,402,313

1,542,179

Current portion of long-term debt (note 8)

1,402,313 Long-term debt (note 8)

102,280

263,506

1,504,593

1,805,685

5,504,008

4,653,944

3,768,207

2,871,950

3,768,207

5,504,008

9,272,215

7,525,894

Fund balances: Reserve Operating

Commitments (note 11) COVID-19 (note 13) $ See accompanying notes to financial statements

5,272,800

5,504,008 $

10,776,808

9,331,579

STATEMENT OF OPERATIONS AND CHANGES IN FUND BALANCES Year ended December 31, 2020, with comparative information for 2019

Operating Fund

2019 Total

2020 Total

Reserve Fund

Revenue: Herdbook services

7,428,881

7,428,881 $

4,867,410

5,829,432

314,157

324,995

Finance and facilities

41,920

43,055

Other

50,589

53,731

12,702,957

13,106,663

Classification and assessment Membership fees

6,855,450

Expenses: Herdbook services

3,977,193

3,605,535

4,417,271

Strategic communication

549,411

724,186

Executive and administration

997,117

1,348,532

1,427,412

1,703,955

Finance and facilities

787,659

747,714

Human resources

251,408

209,314

Data exchange services and research

363,631

408,725

Other

129,705

21,312

151,017

243,721

12,089,071

21,312

12,110,383

13,674,312

613,886

(21,312)

592,574

(567,649)

1,031,832

539

Investment income

142,009

155,575

Realized (loss) gain on investments

(6,859)

2,414

Unrealized (loss) gain on investments

(13,774)

184,310

1,032,371

121,376

1,153,747

342,299

1,646,257

100,064

1,746,321

(225,350)

2,871,950

4,653,944

7,525,894

7,751,244

(750,000)

750,000

Classification and assessment

Holstein Canada | 2020 Annual Report

3,977,193 $

Business and technology solutions

3,870,894

Excess (deficiency) of revenue over expenses before the undernoted Other income (expenses): Canadian Emergency Wage Subsidy Canadian Emergency Rent Subsidy

Excess (deficiency) of revenue over expenses Fund balance, beginning of year Transfer (to) from other funds (note 12)

Fund balance, end of year See accompanying notes to financial statements

3,768,207 $

5,504,008

9,272,215 $

7,525,894

STATEMENT OF CASH FLOWS

Year ended December 31, 2020, with comparative information for 2019

2019

2020 Cash flows from operating activities: Excess (deficiency) of revenues over expenses

$ 1,746,321 $ (225,350)

Items not involving cash: 414,974

405,203

(16,123)

12,479

40,066

6,859

(2,414)

13,774

(184,310)

(284,854)

238,828

38,667

45,537

Inventory

(13,281)

(12,110)

Prepaid expenses

(54,991)

(39,637)

(159,711)

(198,380)

36,266

34,783

1,756,503

86,093

(255,681)

(333,276)

45,252

44,075

405,186

1,315,449

(1,186,580)

(1,186,259)

(89,304)

(248,091)

(1,081,127)

(408,102)

(177,647)

(101,649)

298,000

(177,647)

196,351

Increase (decrease) in cash

497,729

(125,658)

Cash, beginning of year

139,038

264,696

Amortization Accrued interest Loss on disposal of capital assets Realized loss (gain) on sale of investments Unrealized loss (gain) on investments Change in non-cash assets and liabilities: Accounts receivable Holstein Canada | 2020 Annual Report

Other receivables

Accounts payable and accrued liabilities Deferred revenue

Investing activities: Purchase of capital assets Proceeds on disposal of capital assets Proceeds on sale of investments Purchase of investments Change in restricted cash

Financing activities: Repayment of long-term debt Issuance of long-term debt

Cash, end of year See accompanying notes to financial statements

636,767

139,038

NOTES TO FINANCIAL STATEMENTS Year ended December 31, 2020

The Holstein Association of Canada (the “Association”) is a national organization authorized to register Holstein cattle in Canada. The basic purpose of the Association is to improve the breed of Holstein cattle. To this end, it maintains a Herd Book and provides many services to its members to assist them in evaluating, selecting and improving their herds. The Association is a non-profit organization incorporated under the Animal Pedigree Act and accordingly is not taxable by virtue of Section 149 (1) (e) of the Income Tax Act. 1. Significant accounting policies: (a) Basis of accounting: The financial statements have been prepared using Canadian accounting standards for not- for-profit organizations.

Holstein Canada | 2020 Annual Report

(b) Fund accounting: The Association follows the restricted fund method of accounting for revenues and expenses. Revenues and expenses related to service delivery and administrative activities are reported in the Operating Fund. The Reserve Fund reports assets, liabilities, revenues and expenses which are internally restricted to provide for future contingencies and to fund specific projects. (c) Revenue recognition: The Association recognizes revenue as services are rendered. Registration, classification and breed improvement revenues are recognized in the year the service is provided. Membership fee revenue represents annual membership fees paid by the Association’s members. The Association recognizes membership fee proportionally over the term of the membership. Amounts received in advance of the expiry of the membership period is treated as deferred revenue. Investment income includes interest and dividends and is recorded when earned. (d) Inventory: The inventory is primarily comprised of supplies and is recorded at the lower of cost and replacement cost. (e) Foreign currency translation: At the transaction date, each asset, liability, revenue or expense is translated into Canadian dollars by the use of the exchange rate in effect at that date. At the year end, monetary assets and liabilities are translated into Canadian dollars by using the exchange rate in effect at that date and the resulting foreign exchange gains and losses are included in income in the current year. (f) Cash and cash equivalents: The Association considers all highly liquid, high interest investment and savings accounts to be cash equivalents. 19

NOTES TO FINANCIAL STATEMENTS Year ended December 31, 2020

1. Significant accounting policies (continued): (g) Relationship with provincial branches:

Holstein Canada | 2020 Annual Report

The Association is related to its provincial branches as the purpose of the Association and the branches are integrated so that they have common or complementary objectives. In addition, there are provisions in the Association’s charter that prevent any changes in the charter of the branches without the Association’s consent. As a result, the branches receive certain membership rights and privileges. The Association does not have the right to appoint the majority of the voting members of a branch’s board of directors or to exercise control over financing and investing activities but may have the ability to influence parts of the branch’s operations. The branches are non-profit organizations, some of which are unincorporated and others that are incorporated without share capital under the laws of the province in which it resides. Each member of the Association is charged an annual membership fee and a levy that is invoiced and collected by the Association and remitted to the provincial branches pursuant to the by-laws of the Association. The Association also executes certain administrative activities such as making payments on the branch’s behalf which are subsequently reimbursed. At year end, $78,015 (2019 - $93,844) is included in accounts payable and accrued liabilities relating to these amounts. At year end, $8,525 (2019 - $14,455) is included in accounts receivable relating to these amounts. (h) Impairment of long-lived assets: Management reviews the carrying amount of long lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. Any impairment determined by a comparison of the estimated undiscounted future operating cash flows to be generated by the asset with its net carrying value is written off at the time of the impairment. (i) Development costs: Research and development expenditures on internally generated intangible assets are expensed as incurred. (j) Capital assets: The Association’s capital assets are recorded at cost. Amortization is provided as follows:

Asset

Method

Rate

Building

Straight-line

30 years

Building improvements

Straight-line

10 years

Office furniture and equipment

Straight-line

5 years

Data processing

Straight-line

3-4 years

Automobiles

Declining balance

30%

NOTES TO FINANCIAL STATEMENTS Year ended December 31, 2020

1. Significant accounting policies (continued): (k) Collections: The Association’s collections are capitalized in the statement of financial position but are not subject to amortization. Contributions are reported as revenue and an increase to tangible capital assets at their fair value. When fair value cannot be determined, the contribution is recognized at a nominal value. The Association’s collection consists of a Fafard Sculpture. (l) Inter fund transfers: Inter fund transfers represent amounts used to fund projects and initiatives. (m) Financial instruments:

Holstein Canada | 2020 Annual Report

Financial instruments are recorded at fair value when acquired or issued. In subsequent periods, equities traded in an active market and derivatives are reported at fair value, with any change in fair value reported in income. All other financial instruments are reported at cost or amortized cost less impairment. Transaction costs on the acquisition, sale or issue of financial instruments are expensed for those items measured at fair value and charged to the financial instrument for those measured at amortized cost. Financial assets are tested for impairment when indicators of impairment exist. When a significant change in the expected timing or amount of the future cash flows of the financial asset is identified, the carrying amount of the financial asset is reduced and the amount of the write-down is recognized in net income. A previously recognized impairment loss may be reversed to the extent of the improvement, provided it is not greater than the amount that would have been reported at the date of the reversal had the impairment not been recognized previously, and the amount of the reversal is recognized in income. (n) Use of estimates: The preparation of financial statements in accordance with Canadian accounting standards for not-for-profit organizations requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates and may have impact on future periods. 2. Cash: The Association’s bank accounts are held at one chartered bank. The bank accounts earn interest at a nominal rate. Included with cash is $737,510 (2019 - $648,207) in internally restricted funds held in a high-interest savings account earning interest at a rate of 0.35% (2019 – 1.85%). The Association has a revolving demand facility totaling $825,000 which bears interest at the bank’s prime rate plus 0.30% per annum. At year end, this facility was not utilized (2019 – $nil). These facilities are secured by a general security agreement constituting a first ranking security interest in all personal property of the Association. The Association has a credit card facility with US Bank Canada totaling approximately $400,000. At year end, approximately $79,934 of the facility was utilized (2019 – $99,537). 21

NOTES TO FINANCIAL STATEMENTS Year ended December 31, 2020

3. Accounts receivable: Accounts receivable represents trade receivables for membership fees, services and products and are net of an impairment allowance of $40,000 (2019 - $32,000). 4. Investments: 2020 1,814,583 $

1,111,821

1,495,479

1,678,168

Preferred shares

60,228

56,970

Common shares

1,377,918

1,158,778

18,290

Guaranteed investment certificates

2019

Bonds and debentures Canadian provincial and public authorities

Holstein Canada | 2020 Annual Report

Equities

Foreign securities

$ 4,766,498 $

The guaranteed investment certificates earn interest at a rate ranging between 0.90% - 3.01% (2019 - 2.40% - 3.01%). The Canadian provincial and public authorities bonds have interest rates between 2.90% - 4.70% (2019 – 2.90% - 4.70%). These investments will mature within a period of 1 – 5 years and are readily converted into cash. The preferred dividend yields range from 4.90% - 5.20% (2019 - 4.90% - 5.20%). The common shares have no fixed maturity dates and are generally not exposed to interest rate risk. Dividends are generally declared on an annual basis. At year end, the amounts included above are internally restricted in relation to the reserve fund (note 12).

4,005,737

NOTES TO FINANCIAL STATEMENTS Year ended December 31, 2020

5. Capital assets:

Cost

Land

328,851 $

- $

Net book value

328,851 $

328,851

1,905,438

1,102,687

1,202,957

Building improvements

138,661

106,397

32,264

41,848

Fafard sculpture

179,686

Office furniture and equipment

398,850

299,642

99,208

158,804

Automobiles

931,387

428,241

503,146

651,437

Computer hardware and software

584,330

320,561

263,769

163,051

3,060,279 $

2,509,611 $

5,569,890

2,726,634

6. Accounts payable and accrued liabilities: Included in accounts payable and accrued liabilities are government remittances payable of $54,560 (2019 - $67,526). 7. Deferred revenue: 2020 Membership fees

69,182

2019 $

74,086

Product and service revenue $

2019

3,008,125

Building

Holstein Canada | 2020 Annual Report

Accumulated amortization

2020

143,268

70,023 36,979

107,002

NOTES TO FINANCIAL STATEMENTS Year ended December 31, 2020

8. Long-term debt: 2020 Revolving term loan, repayable in monthly installments of $4,022 including interest calculated at a rate of 4.6% per annum, maturing June 2021, secured by a general security agreement.

69,823

Revolving term loan, repayable in monthly installments of $2,369 including interest calculated at a rate of 4.6% per annum, maturing August 2022, secured by a general security agreement.

45,533

71,226

Revolving term loan, repayable in monthly installments of $2,352 including interest calculated at a rate of 4.6% per annum, maturing June 2022, secured by a general security agreement.

40,888

66,587

136,975

207,518

16,299

25,999

263,506

441,153

(161,226)

(177,647)

Revolving term loan, repayable in monthly installments of $6,471 including interest calculated at a rate of 4.05% per annum, maturing October 2022, secured by a general security agreement. Non-revolving term loan, repayable in monthly installments of $891 including interest calculated at a rate of 4.6% per annum, maturing July 2022, secured by a general security agreement. Holstein Canada | 2020 Annual Report

23,811

2019

Current portion Long-term portion of debt

102,280

263,506

161,226

Principal repayment on long-term debt over the next two years are as follows:

2021 2022

102,280 $

263,506

The Association has a $620,000 term loan credit facility and a $620,000 revolving lease line of credit with RBC. The total combined borrowings under these two facilities may not exceed $620,000 at any given time. At year end, approximately $247,207 (2019 - $415,154) of the term loan facilities was utilized, with no drawings on the lease line of credit (2019 - $nil).

9. Pension plan: The Association maintains a defined contribution pension plan for all employees whereby it matches employee contributions up to a specific percentage of the employee’s earnings, subject to certain limits determined by the date the employee joined the plan. The pension expense for the year was $184,518 (2019 - $182,061). 10. Financial instruments: (a) Credit risk: Financial instruments potentially exposed to credit risk include cash, investments and accounts receivable. Deposits held with banks may exceed the amount of insurance provided on such deposits. Generally these deposits may be redeemed on demand and are maintained with financial institutions of reputable credit and therefore bear minimal risk. Investments are not significantly concentrated and are primarily invested 24

NOTES TO FINANCIAL STATEMENTS Year ended December 31, 2020

10. Financial instruments (continued): in high grade investments. Management considers its exposure to credit risk over cash to be remote as the Association holds cash deposits at one major Canadian bank. Receivables are due from a large membership and customer base, which is geographically dispersed. The Association evaluates its members’ and customers’ financial condition and limits the amount of credit extended when deemed necessary. The Association utilizes an allowance for doubtful accounts to record potential credit losses associated with its trade receivables and credit losses to date have been within management’s expectations. (b) Liquidity risk: Liquidity risk is the risk the Association will not be able to meet its financial obligations as they come due. The Association has taken steps to ensure that it will have sufficient working capital available to meet its obligations by maintaining sufficient cash levels and investing in short- term, high grade investments.

Holstein Canada | 2020 Annual Report

(c) Interest rate risk: Interest rate risk refers to the risk that the fair value of financial instruments or future cash flows associated with the instruments will fluctuate due to changes in market interest rates. The Association manages the interest rate risk of its investments in guaranteed investment certificates and fixed income investments by using a laddered portfolio with varying terms to maturity. (d) Foreign exchange risk: The Association is exposed to currency risk through holdings of investments in foreign currencies. Fluctuations in the relative value of foreign currencies against the Canadian dollar can result in a positive or negative effect on the fair value and future cash flows of these investments. Less than 2% of the Association’s portfolio is subject to foreign currency risk. There have not been any changes in the risks identified above from the prior year. 11. Commitments: The Association is committed to paying annual service fees for genetic evaluations activities carried out by the Canadian Dairy Network (“CDN”), a company doing business as Lactanet, pursuant to an agreement between the CDN, Canadian Artificial Insemination Centers, Canadian Milk Recording Agencies and Canadian Breed Associations. The estimated cost to the Association for fiscal 2021 is $345,000, plus $75,000 for dairy research as part of the DairyGen Council. 12. Reserve fund: The Association has a reserve fund established to address for future contingencies and to fund specific projects. During the year, $750,000 of the monies saved from travel and event cancellations due to COVID-19 was transferred from the operating fund to the reserve fund for use in future projects (2019 - $nil transfers). 13. COVID-19:

In March 2020, the COVID-19 outbreak was declared a global pandemic by the World Health Organization, which has resulted in governments worldwide, including Canada, enacting emergency measures to combat the spread of the virus. These measures, which include the implementation of travel bans, self-imposed quarantine periods and social distancing, have caused material disruption to businesses globally and in Canada, resulting in economic slowdown.

NOTES TO FINANCIAL STATEMENTS Year ended December 31, 2020

13. COVID-19 (continued): As a result, the Association is closely monitoring its costs and expenditures to manage the potential impact of reduced revenues and has taken measures including revising budgets, reducing costs where applicable, workforce arrangements and moving its office almost entirely to a work from home environment. As the Association provides essential services that support the integrity of Canada’s food supply, the most significant negative impact on revenue occurred during to the first twelve weeks of the pandemic lockdown when field service employees were recalled. The Association’s on-farm services resumed in June with enhanced health and safety protocols in place to protect the safety of our employees in the field, dairy producers and their herds. The impact on cash flows, working capital levels and/or debt balances, which may also have a direct impact on the organization’s operating results and financial position in the future, will depend on a number of variables including regional travel restrictions and ongoing developments in vaccination and pandemic management by provincial and federal levels of government.

Holstein Canada | 2020 Annual Report

The Association has accessed government assistance via the Canadian Emergency Wage Subsidy and Canada Emergency Rent Subsidy. During the year, the Association received $1,031,832 and $539 under these programs, respectively.

The situation is dynamic and the ultimate duration and magnitude of the impact on the economy and the financial effect on the Association is not known at this time. 14. Comparative figures: Certain comparative figures have been reclassified to conform with the current year presentation.